When looking at your credit report, especially for the first time you will have many questions. One being what is derogatory credit and how did it get there? While some derogatory conditions may stand out clearly as to why they’re there and how they got there. There will be others that will need some explaining. More on that a little later. Lets first answer the question of what is derogatory credit?
Derogatory accounts are accounts on the credit report that reflects negatively on credit history. Basically, any instance where the individual borrowing money has not come through on the agreement to pay back the borrowed funds. The most obvious example are missed payments on a credit card. That is the most common. Yet derogatory credit expends to more than simply missed payments. There are also judgments on credit, unpaid taxes that show up as tax liens and collections and charge offs. Also, very common are medical collections that show up for thirty, fifty, sometimes as low as twenty dollars. I think we can agree that twenty dollars aren’t worth paying a high interest rate on your mortgage or car note. Medical collections have a way of creeping into credit because many times we tend to ignore small bills of medical nature because
Collections are accounts that have been behind on payments for months without payment. Charge offs are accounts that are behind on payments, similar to a collection. The difference between the two is that a charge off is being written off by the creditor. What usually follows are collection attempts from collection companies who buy the bad debt from the creditor and make more aggressive attempts to collect from the borrower.
Derogatory credit can be repaired on a budget. What you’ll have to do is educate yourself. The first obstacle many are having when trying to clear credit is using outdated dispute techniques. For example the dispute letters. Dispute letters, work they just have to be used in a slightly different way. The most powerful part to your approach is knowing your rights and the laws that protect you, the consumer, from collectors with questionable collection tactics.
With the right tools and credit repair manuals you’ll learn how to dispute the accounts and have charge offs removed. Many collection companies violate consumers rights, when collecting. Be sure to know what your right are. Get a short version of the Fair Credit Reporting Act (FCRA) and the Fair debt collection practice act (FDCPA). Education and understanding is the key.
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